Florida Senate - 2016                                     SB 940
       By Senator Bradley
       7-01108-16                                             2016940__
    1                        A bill to be entitled                      
    2         An act relating to title insurance; amending s.
    3         625.111, F.S.; revising the reserves that certain
    4         title insurers must set aside after a certain date;
    5         revising the manner in which reserves must be
    6         released; revising reserve requirements for a title
    7         insurer who transfers domicile to this state;
    8         providing an effective date.
   10  Be It Enacted by the Legislature of the State of Florida:
   12         Section 1. Subsections (1) and (3) of section 625.111,
   13  Florida Statutes, are amended to read:
   14         625.111 Title insurance reserve.—In addition to an adequate
   15  reserve as to outstanding losses relating to known claims as
   16  required under s. 625.041, a domestic title insurer shall
   17  establish, segregate, and maintain a guaranty fund or unearned
   18  premium reserve as provided in this section. The sums to be
   19  reserved for unearned premiums on title guarantees and policies
   20  shall be considered and constitute unearned portions of the
   21  original premiums and shall be charged as a reserve liability of
   22  the insurer in determining its financial condition. Such
   23  reserved funds shall be withdrawn from the use of the insurer
   24  for its general purposes, impressed with a trust in favor of the
   25  holders of title guarantees and policies, and held available for
   26  reinsurance of the title guarantees and policies in the event of
   27  the insolvency of the insurer. This section does not preclude
   28  the insurer from investing such reserve in investments
   29  authorized by law, and the income from such investments shall be
   30  included in the general income of the insurer and may be used by
   31  such insurer for any lawful purpose.
   32         (1) For an unearned premium reserve established on or after
   33  July 1, 1999, such reserve must be in an amount at least equal
   34  to the sum of paragraphs (a), (b), and (d) for title insurers
   35  holding less than $50 million in surplus as to policyholders as
   36  of the previous year end and the sum of paragraphs (c) and (d)
   37  for title insurers holding $50 million or more in surplus as to
   38  policyholders as of the previous year end or title insurers that
   39  are members of an insurance holding company system having $1
   40  billion or more in surplus as to policyholders and rated “A-” or
   41  higher by A.M. Best Company:
   42         (a) A reserve with respect to unearned premiums for
   43  policies written or title liability assumed in reinsurance
   44  before July 1, 1999, equal to the reserve established on June
   45  30, 1999, for those unearned premiums with such reserve being
   46  subsequently released as provided in subsection (2). For
   47  domestic title insurers subject to this section, such amounts
   48  shall be calculated in accordance with state law in effect at
   49  the time the associated premiums were written or assumed and as
   50  amended before July 1, 1999.
   51         (b) A total amount equal to 30 cents for each $1,000 of net
   52  retained liability for policies written or title liability
   53  assumed in reinsurance on or after July 1, 1999, with such
   54  reserve being subsequently released as provided in subsection
   55  (2). For the purpose of calculating this reserve, the total of
   56  the net retained liability for all simultaneous issue policies
   57  covering a single risk shall be equal to the liability for the
   58  policy with the highest limit covering that single risk, net of
   59  any liability ceded in reinsurance.
   60         (c) On or after January 1, 2014, for title insurers that
   61  are members of an insurance holding company system having $1
   62  billion or more in surplus as to policyholders and rated “A-” or
   63  higher by A.M. Best Company or title insurers holding $50
   64  million or more in surplus as to policyholders as of the
   65  previous year end, a minimum of 6.5 percent of the total of the
   66  following:
   67         1. Direct premiums written; and
   68         2. Premiums for reinsurance assumed, plus other income,
   69  less premiums for reinsurance ceded as displayed in Schedule P
   70  of the title insurer’s most recent annual statement filed with
   71  the office with such reserve being subsequently released as
   72  provided in subsection (2). Title insurers with less than $50
   73  million in surplus as to policyholders that are not members of
   74  an insurance holding company system holding $1 billion or more
   75  in surplus as to policyholders and rated “A-” or higher by A.M.
   76  Best Company must continue to record unearned premium reserve in
   77  accordance with paragraph (b).
   78         (d) An additional amount, if deemed necessary by a
   79  qualified actuary, to be subsequently released as provided in
   80  subsection (2). Using financial results as of December 31 of
   81  each year, all domestic title insurers shall obtain a Statement
   82  of Actuarial Opinion from a qualified actuary regarding the
   83  insurer’s loss and loss adjustment expense reserves, including
   84  reserves for known claims, incurred but not reported claims, and
   85  unallocated loss adjustment expenses. The actuarial opinion must
   86  conform to the annual statement instructions for title insurers
   87  adopted by the National Association of Insurance Commissioners
   88  and include the actuary’s professional opinion of the insurer’s
   89  reserves as of the date of the annual statement. If the amount
   90  of the reserve stated in the opinion and displayed in Schedule P
   91  of the annual statement for that reporting date is greater than
   92  the sum of the known claim reserve and unearned premium reserve
   93  as calculated under this section, as of the same reporting date
   94  and including any previous actuarial provisions added at earlier
   95  dates, the insurer shall add to the insurer’s unearned premium
   96  reserve an actuarial amount equal to the reserve shown in the
   97  actuarial opinion, minus the known claim reserve and the
   98  unearned premium reserve, as of the current reporting date and
   99  calculated in accordance with this section, but not calculated
  100  as of any date before December 31, 1999. The comparison shall be
  101  made using that line on Schedule P displaying the Total Net Loss
  102  and Loss Adjustment Expense which is comprised of the Known
  103  Claim Reserve, and any associated Adverse Development Reserve,
  104  the reserve for Incurred But Not Reported Losses, and
  105  Unallocated Loss Adjustment Expenses.
  106         (3) If a title insurer that is organized under the laws of
  107  another state transfers its domicile to this state, the
  108  statutory or unearned premium reserve shall be the amount
  109  required by the laws of the state of the title insurer’s former
  110  state of domicile as of the date of transfer of domicile and
  111  shall be released from reserve over the subsequent 20 years at
  112  an amortization rate not to exceed the formula in paragraph
  113  (2)(c) according to the requirements of law in effect in the
  114  former state at the time of domicile. On or after January 1,
  115  2014, for new business written after the effective date of the
  116  transfer of domicile to this state, the domestic title insurer
  117  shall add to and set aside in the statutory or unearned premium
  118  reserve such amount as provided in subsection (1).
  119         Section 2. This act shall take effect July 1, 2016.